Italy's Eni latest producer to sign new Algerian upstream MOU

Algiers — Italy's Eni -- already a major player in Algeria's upstream industry -- has become the latest international producer to sign a memorandum of understanding with state-owned Sonatrach to allow for talks on new upstream opportunities there.

The MOU -- signed in Algiers by Sonatrach CEO Toufik Hakkar and his Eni counterpart Claudio Descalzi -- also covered "potential opportunities for exploration and production abroad," the companies said in separate statements July 1.

Algeria has vowed to increase exploration together with international partners following the implementation of a new hydrocarbon law in January, which offers potential investors a more favorable tax regime.

Sonatrach has already signed five memorandums of understanding -- with Chevron and ExxonMobil, as well as with Russia's Lukoil and Zarubezhneft, and Turkey's TPAO -- that allow for talks on opportunities in the Algerian upstream.

Sonatrach has said the MOUs confirm the "renewed dynamism" in Algeria's upstream sector against the background of the more attractive terms introduced by the new hydrocarbon law.

It has also held talks with other big names in the international upstream including ConocoPhillips, Norway's Equinor, Austria's OMV and Russia's Gazprom Neft -- as it looks to woo foreign companies back to the country in a bid to revive its flagging oil and gas sector.

Berkine Nord sales

As well as signing the upstream MOU, Eni and Sonatrach also signed three gas agreements relating to the marketing by Sonatrach of gas from the Eni-operated Berkine Nord gas project, comprising the Ourhoud-2, Sif Fatima-2 and Zemlet El Arbi fields.

The volume under the sales agreement is for almost 1.5 Bcm a year until 2049, Sonatrach said. Eni is operator with a 49% stake in the three fields in the Berkine Nord basin.

Eni said in a separate statement that both companies had agreed to continue the acceleration of the Berkine Nord project and that they aimed to export 6 million cu m/d of gas from the project by the end of 2020.

"Both CEOs committed to an accelerated time-to-market path," Eni said.

Eni said its MOU with Sonatrach on new upstream opportunities also included extending the fast track development model successfully applied to the Berkine Nord project to other projects.

Eni's equity production in Algeria is expected to exceed 100,000 b/d of oil equivalent in the short term, it said.

Gas contract

The two companies also agreed an amendment to their bilateral gas sales contract that sets the commercial conditions for Gas Year 2020, starting on October 1, 2020.

It gave no further details on what those commercial terms would be.

Eni's Algerian import contract with Sonatrach dates back to 1977 and was renewed in May 2019 to supply the Italian market for eight years until 2027, plus two additional optional years.

The volume in the Eni contract is said to be 9 Bcm/year.

The partnership between Eni and Sonatrach also covers the development of renewable energy.

"Feasibility studies are to be carried out immediately for the expansion of the BRN photovoltaic system built at the end of 2018 and for the creation of a new photovoltaic system at the MLE site which will supply clean energy to the existing gas treatment plant," Eni said.

Descalzi, who also met with Algeria's new energy minister Abdelmadjid Attar, said the meeting was "testament to the commitment of Sonatrach and Eni to expand their partnership in Algeria."

It also furthered the companies' shared strategy of "accelerated development of projects and pursuing decarbonization objectives as part of our commitment to achieve long-term carbon neutrality by reducing and offsetting climate-altering gas emissions."